Center for Popular Economics

Economics for people, not profit. http://populareconomics.org

[popularecon]

Juliet Schor was a founding member of the Center for Popular Economics.  After earning her Ph.D. at the University of Massachusetts – Amherst, she taught in the Economics Department at Harvard University for 17 years.  In 2001 she joined the Sociology Department at Boston College.  Her books include The Overworked American, The Overspent American, and Plenitude: The New Economics of True Wealth. We asked her about her work with the Center for Popular Economics (CPE), the need for a “people’s economics”, and how the Left and the economics discipline have changed over the years.

Anders Fremstad: How did your work with the Center for Popular Economics (CPE) begin?

Juliet Schor: We founded CPE at a time when the corporate backlash to the gains from the 60s and 70s was building.  We heard a lot of discussion from progressive activists about their inability to fight back against the economic discourse that was coming from the corporate sector.  This was a moment when corporations were really on the offensive — taking out ads on the op-ed page of the New York Times with their point of view.  It was the corporate backlash and business’ attempts to create a new regime of accumulation, which eventually came about after 1979 with the move to neoliberalism.  We were seeing that happen, and we were trying to counter it with an alternative view of economics for people.

CPE’s work began with the Summer Institute.  The Summer Institute was the only thing we did at first, and then we began to get requests to run institutes and workshops in other places.  The philosophy was to bring people together who were coming from disparate backgrounds and perspectives, and put them in a very non-instrumental setting, so that there was no agenda other than to learn.  The canonical example would be an environmentalist and a trade unionist.  We bring these people together, they spend a week together, they get to know each other better, to try to build bridges across some of the divides in the left.

Why was economics central to this fight?

Corporations were using economics a lot, because you had a bad economy, you had stagflation, you had profit squeeze, you had unemployment.  The economy itself was in chaos.  The Keynesian regime of accumulation was clearly faltering, so this was a concerted effort with a big PR campaign by corporate America to reclaim the agenda.  CPE created materials like “Up Against the Wall Street Journal” where we would teach people how to counter corporate arguments.

Do you think that there is more solidarity among anti-capitalist movements today than when CPE began?

I think there is more solidarity now.  One reason is that there is more commonality of experience as the economy is harming all of these groups.  Take something like labor unions — they had a much more privileged position in comparison to, say, queer activists back then.  Now the privileges of some parts of the Left have really eroded, and I think there are also worse outcomes from the economy so that the same dynamics are affecting the groups more. In some sense what is happening today is not really that different than what was happening then, it is just a more extreme version.  Some things have changed, but the sort of degradation of working people that was really starting then is much more extreme now.

You know at that time when we started in 1979, the Left had gone through a lot of fractious battles in the 1970s.  We had just gone through the emergence of those movements.

The trade unionists we got were the more progressive trade unionists.  They were prized.  We wanted them.  And we did get some, but we had really a wide mix of people — we had welfare rights activists, we had phenomenal participants, especially in the first few years because this was something new and very interesting to activists.  There were some professional, radical economists who were going to help activists with something that was proving to be a real problem in their work.  And UMass had become known by that time, so we were able to get some great people — really effective leaders in their own sectors.

Did you come to do you graduate work in economics because you thought studying economics was necessary for people on the Left?

I did a lot of political stuff before I came to graduate school.  The semester before I came to UMass I was working as a volunteer, putting in lots of hours at Dollars and Sense.  When I arrived at UMass we founded the Red Cent Collective. It was a journalist collective and we were writing popular economics articles together.  Then South End Press.  Then CPE.  They were all of the same piece — popularizing these alternative economic theories.  What today we might call heterodox economics. But basically we were doing Marxian and left-Keynesian economics.

I got interested in economics early. I was a Marxist, and if you were a Marxist you studied economics, you studied history, you studied philosophy. I was studying all those things.  Economics happened to be the field that most captivated me intellectually. And then as the economy became so prominent in the discourse in national politics, I was lucky to be there.  It was a very exciting time from the point of view of doing radical economics — and that is pretty much what we called it.  If you’d asked me what I did at that time, I would have said I was a radical economist. It was a growing and vibrant paradigm and intellectual community that was connecting with stuff that was happening all over the world.

Has mainstream economics changed since you first started studying it?

When I first went to the London School of Economics in 1975 — that’s when I started graduate school — the profession had already been moving to the right with the rise of Chicago Economics.  But it wasn’t so obvious yet, because of all the political ferment.  Those of us that were in radical economics felt that ours was the rising paradigm.  The failures of liberal Keynesianism were not yet so obvious in 1975 as they would be in 1980 or 1985, but when you look back you can see that it was already starting to happen.  So I would say that the years I was in graduate school, our paradigm was thriving, but the discipline was moving rightward.

We went through a period of increasing dominance of the Right in economics, with national policy and elite opinion.  I very much believe that economics is a discipline that follows national politics.  That continued for a long time.  I think it began to change a few years ago. I think the crash was the most important aspect of this.  Now it does feel like the discipline has opened up a bit.  Consider something like behavioral economics, which has been chugging along since the 1970s, with less impact that it might have had because it was moving against the political headwinds.  Until the movement to the right stopped, it was hard for behavioral economics to make as much headway as I think it has more recently, now that the Chicago model or neoliberalism has had the wind taken out of its sails.  That happened because of the crash, and it is easier for other things to come up.  So I do think you have greater openness today than we had twenty years ago.

How has radical economics evolved over this time?

With the fall of the Soviet Union, radical economics lost its confidence.  This was despite the fact that very few radical economists looked to the Soviet Union as a model of anything —  we were extremely critical of it, and we did not advocate anything like it.  But ideas like “there is no alternative” and “the end of history” really had an impact on the confidence of people articulating a different point of view.  Many people began doing work that was mainly a critique of neoclassical economics — often empirical critiques showing that neoclassicals are wrong on this or that — all of which is great important work but it is different from building an alternative paradigm.

What are the popular movements that you think are the most promising today?

Well I personally am most excited about what is going on around climate and climate justice.  My own transformation was around environmental issues.  The climate movement has really taken off in recent years, and that is exciting.

The inequality agenda has also taken off.  One of my good friends from college, Danny Cantor, founded the Working Families Party in New York.  They have had incredible success with a coalition of community organizations and labor unions.  That was the sort of alliance we were thinking of in the summer institute — poor people, people of color, with organized labor.  At that time those groups were at each other’s throats.  The labor unions at that time tended to be very different —  they were not against the Vietnam War, many unionists were Reagan Democrats, and unions were much more backward then on issues of race.  So this is an exciting movement, along with the whole Occupy movement.  Basically this is all happening at the local level, and I think it will bubble up.

Are there any other issues that you think progressive economics gets wrong?  Are academics and movements on the Left making mistakes?

A few things.  The first thing that I really came to be critical about in terms of the way I had been approaching the world is around the question of economic growth in rich countries.  In the 70s when I was in graduate school, we were experiencing slow growth, stagflation, and high unemployment.  We took a pretty social-democratic view that growth is good and that jobs trickle down.  I became more critical of that from an environmental point of view originally, and then from all the work on happiness.  We always thought that inequality was bad, but it is now less clear that the expansion of GDP is going to yield widespread benefits.  To be fair, if you look at the indicators of wellbeing and their relationship to GDP, they move pretty closely with GDP until the 1970s, so the fact we felt that way in the 1970s was pretty justified.  But this is when you begin to get the big divergence.  And I would say I sort of peeled off from that pro-growth point of view by the mid- to late-1980s.  My research on working hours was part of it.  And my husband also showed that the rest of the world cannot live like Americans.  I now have much more ecological consciousness than I had in 1982.  So that’s one thing.

I would say the other thing is that I had a simplistic idea of the relationship between economic interests and political action or action in general.  I was too economistic.  Back in the day, I thought that if the unemployment rate goes up to such-and-such a level, people are going to be in the streets.  And then here we had the Great Recession and hardly anyone took to the streets.  I thought that if inequality gets bad, there would be political organization against it.  In retrospect, I think it’s unclear that action follows economic interests.  This is also coming from sociology, since sociologists understand human actions differently than economists.  They are thinking about “what is it that makes people act?” and so forth.  Not that I have a good model of what makes people politically active — I’m not sure that anyone does.  But we know that economic interest is neither a necessary nor a sufficient condition for people getting active.  So what is it that creates activism?  I’ve done a little bit of work on that in relation to consumption values and their relationship to political activism, but it is not my specialty.  But I do think that is something we got wrong.  Like the rest of economics, we were too economistic.

Personally, I’ve worked a lot on consumer culture —  are preferences independent and so forth — that’s a big thing. I would also say that we learned a lot from the political movements that had a range of critiques of capitalism: not just from the Marxian point that workers were being exploited, but also environmental, gender, and cultural critiques of consumerism. There are ways in which, when you start doing radical economics, the paradigm went in a more economistic direction.  I think that popular movements have really opened up since then.  CPE is much broader now in the kinds of things it does, the sorts of issues that it deals with, compared to that time when we were much more focused on growth and class conflict.

Is there anything else you’d like to share with young activists or current members of the Center for Popular Economics?

I’ve always thought that CPE was a really unique and important institution because economics has been a weak point on the Left for some time.  For the last many decades, the Left has been on the defensive in terms of economic analysis.  So what CPE does, which is economic analysis for the people, is incredibly important.

The occupy movement was a recognition of how little progressive and radical economic teaching is going on and how hungry activists were for it.  It was amazing to me to go to Occupy sites and be asked the kinds of basic economic questions people were asking me. There was real hunger for an alternative economic analysis.  We’ve lost a lot of time by generating cohorts of students who haven’t been exposed to it because there are so few radical economists. So CPE is important because it is one of the few institutions in the country that is actually teaching people a different way of thinking about what is going on in the economy.  So kudos to all the contemporary CPEers.

Thanks.

My pleasure.  Its fun to go down memory lane

[popularecon]

By Helen Scharber

Like any system, the system of theories and methods known as economics needs diversity.  Diversity is critical, as students of biology know, because it allows systems to adapt to inevitable changes.  While economics has a variety of subfields— from micro and macro to behavioral and monetary— the discipline is mostly a monoculture, in that it rarely looks outside of the theoretical lens known as neoclassical economics, which focuses heavily on individualism and markets.  The effects of the lack of diversity and overreliance on neoclassical theory were made very visible in the failure of the economics discipline to predict and appropriately respond to the most recent global economic crisis.  The Queen of England (and everyone else) rightly wondered why so many clever, well-trained economists failed so miserably.  The economists who responded chocked it up to “a failure of the collective imagination of many bright people,” but perhaps their imaginations would have failed less spectacularly had they not all had the same, narrow training.

Fortunately, a movement is afoot to propagate diversity in economics education.  While the push for pluralism in economics is nothing new— some graduate programs, organizations and networks have been expanding the discipline’s boundaries for years— the recent injection of energy has come largely from students and young people.  The International Student Initiative for Pluralism in Economics (ISIPE), with member groups from over 30 countries, released an open letter in May decrying the “lack of intellectual diversity” in the discipline that “limits our ability to contend with the multidimensional challenges of the 21st century – from financial stability, to food security and climate change.”  They call on economists to reconsider the way economics is taught, including 1) Hiring instructors and researchers who can bring theoretical and methodological diversity to economics programs; 2) Creating texts and other pedagogical tools needed to support pluralist course offerings; and 3) Formalizing collaborations between social sciences and humanities departments or establishing special departments that could oversee interdisciplinary programs blending economics and other fields.  These are all very good ideas.

Other indications that change is afoot have been bubbling up from other corners.  Rethinking Economics, one of the signatory groups to the ISIPE letter, held their second conference in London on June 28 and 29, to explore “both the problems with the current system” and “alternatives to the way things are done now.”  The group will organize another student-run conference in New York City in September 2014.  The Curriculum in Open-access Resources in Economics (CORE) project, funded by the Institute for New Economic Thinking, is developing curriculum that aims to close the gap between “the questions we are being pressed to answer by the public…and the often-unrelated content of our curriculum.”  Toward this end, the CORE curriculum attempts to introduce tools in response to questions and observations— rather than providing tools and axioms in search of things to explain— though there has been healthy debate around how well it will achieve its goal.

In early June, I was on a panel at the New Economy Coalition’s CommonBound conference called “How to Change the Teaching of Economics.”  The room, filled with eager participants and tangible energy for the topic, was another testament to the interest in making change.  How can we move from a world characterized by the domination of one unified body of economic theory— one in which many powerful people are heavily invested— to a world where different lenses are appreciated and taught?  There is no quick fix, but change will likely involve answering another question, posed (and tweeted) by a participant at the Rethinking Economics conference in June: How do we learn to co-operate in a society that puts individualism on a pedestal?  Indeed, many of the panelists’ ideas involved collective action: organizing students and other activists, creating mentorship networks for sympathetic teachers, sharing resources. Personally, I’ll do what I can to support this movement— with so many economic, social and environmental obstacles to overcome in coming years, we cannot afford another failure of the collective imagination of economists.

[popularecon]

By David Kotz

In the summer of 1964 – fifty years ago this summer – the civil rights movement launched a bold project aimed at defeating racial segregation in its stronghold in the deep south state of Mississippi, a project in which I participated. African-Americans were about a third of the state population. They faced job market segregation that restricted them largely to menial, low-paying jobs, channeling many of them, adults and children, into back-breaking cotton-picking jobs once performed by slaves. The separate schools for their children had little funding and delivered not much education. Only a handful had been able to register to vote. This racial caste system was enforced by official and private violence directed at anyone who challenged it.

Most of Mississippi’s white population was also poor, as the state came in last on many measures of economic welfare and public health. However, the false promise of racial superiority, played on by politicians, kept low-income whites reliable supporters of the system. Any white person who questioned the system was ostracized, and some who did were driven out of the state. Meanwhile, the real beneficiaries of this system were the rich white plantation owners who were assured cheap labor with no rights on the job.

Gaining the franchise for black people was seen as a key step toward overturning segregation in Missisippi, in light of the black majority in many areas of the state. Since the early 1960s efforts by the Student Non-Violent Coordinating Committee (SNCC) to organize black Mississippians to register to vote were unable to overcome the resistance of the Mississippi power structure. Those who tried to register were threatened with loss of their job, violence, or death. In one famous incident in September 1961, a state legislator, E.H. Hurst, shot and killed Herbert Lee, a black dairy farmer and father of nine children in the town of Liberty, in response to Lee’s activism encouraging black people to register to vote. Despite the event being witnessed by a dozen people, no charges were filed.

SNCC decided a new tactic was needed to crack the resistance of Mississippi’s power structure. Organized by SNCC in coalition with another militant civil rights group, the Congress for Racial Equality (CORE), the Mississippi Summer Project – later known as Mississippi Freedom Summer – recruited some 800 northern and western college student volunteers to go to Mississippi for the summer. The students would work on voter registration as well as education, setting up “freedom schools” throughout the state for black children. The subtext of the project was to force America to face the oppression and violence in Mississippi, resulting, it was hoped, in political pressure that would force change on the state.

As a 21-year old college student, I was among the hundreds of summer volunteers in the Mississippi Summer Project. In June 1964 I attended the first orientation session for project volunteers in Oxford, Ohio. At that session I was selected to work in the city of Meridian. On June 19, seven of us left for Mississippi in a station wagon: Jimmy Chaney, Andy Goodman, Micky Schwerner, myself, and 3 other summer volunteers. Schwerner was the Meridian project director, Chaney a local activist, and Goodman a college student summer volunteer from Queens College in New York City. The three would be murdered the next day by a group of law enforcement officials and private citizens.

We arrived in Meridian on June 20, 1964. The next morning Chaney, Schwerner, and Goodman left to go to neighboring Neshoba County to investigate the burning of Mt. Zion Church, which had occurred while we were in Ohio. When the three did not return by 4 P.M., the designated return time, the four of us left behind began calling the local jails in Neshoba County. When we called the jail in the county seat Philadelphia, we were told that the three civil rights workers had not been seen – a lie, since in fact at that moment the Deputy Sheriff was holding the three in his jail.

A short while later, following the advice of the project central office in Jackson, we called the Justice Department in Washington and spoke with John Doar, who was in charge of Civil Rights enforcement. (Mr. Doar later became nationally prominent as the chief attorney for the Watergate Commission.) We asked him to instruct the FBI to call the local jails. He refused to do so, stating that he could not act until 72 hours had passed, since that was the time that must elapse before a missing persons report can be filed. We told him that this was not a case of someone walking out after a marital dispute, that 3 civil rights workers were missing in a part of Mississippi known to have Ku Klux Klan activity. We begged him to order the FBI to call the local jails. He continued to refuse.

Had John Doar done as we asked, the resulting FBI phone call to the jail in Philadelphia might well have caused Deputy Sheriff Price to hesitate to carry out his plan to take the three civil rights workers out the next morning and murder them. We will never know.

From these events, I learned that the system of racial segregation in Mississippi, and in the rest of the South, with its racial injustice, economic injustice, and violence, was not based just in Mississippi and the South. It was part of the system of power in the U.S. John Doar’s refusal to order the FBI to make those phone calls was a reflection of the fact that the national power structure was reluctant to intervene in the segregationist system, because of the tie between the Southern Democratic Senators and the National Democratic Party leadership at that time.

The disappearance of the three civil rights workers, whose bodies were not found until early August, did not deter the summer project workers. We continued our work through the summer, teaching in freedom schools and organizing a challenge to the official Mississippi delegation to the Democratic Party national convention in August of that Presidential election year. That challenge enabled Fannie Lou Hamer, sharecropper and civil rights activist, to give electrifying testimony before the Credentials Committee of the convention. President Lyndon Johnson, fearing the effect of the eloquent Ms. Hamer’s coming testimony on his re-election campaign, hastily called a press conference to interrupt the national television coverage of her presentation. Despite the absence of an internet or Youtube, her testimony found its way into the media in the following days.

SNCC’s strategy was successful. America was forced to confront the existence within its borders of a violent and repressive racial caste system. The Mississippi Summer Project played a significant role in forcing the enactment of the Voting Rights Act in the following year, which finally broke the back of legal segregation. Once Mississippi had large numbers of black voters, the calculus of politicians changed, and the system could not survive. Legal segregation came to an end. Ordinary people – sharecroppers, domestic workers, janitors – had stood up, together with their outside student supporters, and changed society.

The sacrifice made that summer fifty years ago by the three murdered civil rights workers, together with the example of the African American people of Mississippi rising up against their oppression, inspired many of my generation to dedicate their lives to ending racial injustice, economic injustice, and violence. These problems have continued to fester in our country and our world, from the Vietnam War up until today. This job is not over. We still need to work to build a different world of racial equality, economic justice, and peace. To do so, we must relearn the lesson that ordinary people have the ability to change the world when they stand up together.

[popularecon]

By Anders Fremstad

The internet has sharply reduced the cost of peer-to-peer transactions.  In the 1990s and 2000s, Craigslist and eBay made it much easier to buy and sell secondhand goods, and these sites now facilitate over a million transactions a day.  More recently, online platforms associated with the “sharing economy” are helping friends, neighbors, and even strangers borrow, lend, and rent goods.  Travellers can reserve a spare room through Airbnb or find a free place to crash on Couchsurfing.  People can find a ride on Uber or rent a neighbor’s car on RelayRides.  Neighbors can increasingly borrow tools, gear, and appliances free-of-charge on NeighborGoods, Sharetribe, and similar sites.  Most observers celebrate how the sharing economy lowers the cost of accessing goods, but there is agrowing debate over how these online platforms should be regulated.  Unfortunately, this debate ignores how many of the fundamental problems with the sharing economy arise from its corporate nature.  The solution may not be to simply regulate the corporate sharing economy but to also democratize the sharing economy by empowering the people who use these platforms to determine how they work.

Dean Baker provides the strongest argument for regulating online platforms in his article, “Don’t buy the ‘sharing economy hype”. Like most economists, Baker recognizes “the good thing about the sharing economy is that it facilitates the use of underutilized resources.”  In economic terms, we can squeeze more utility out of a given quantity of rooms, vehicles, tools, appliances, and gear if we use these “shareable goods” more intensively.  The sharing economy has the potential to help us reduce our environmental footprints while maintaining or improving our standard of living.

But Baker argues that the sharing economy companies often compete with traditional industries on an uneven playing field.  Many Airbnb hosts do not pay the same fees that hotels pay to local governments, and Uber drivers don’t purchase the same medallions that taxi drivers (or companies) acquire.  Nor do the these online platforms require hosts and drivers to meet the same safety standards as traditional hotels and taxis.  Baker is correct that “it doesn’t make sense to essentially exempt entire classes of business from safety regulations or taxes just because they provide their services over the Internet”, but he offers little guidance about how regulations should be re-written for the sharing economy.  For example, there is a good case for requiring Airbnb to collect and pay hotel fees on behalf of its users, but should we impose the same tax on Couchsurfing, whose members host guests for free?  Should we impose the same safety standards on people who occasionally host guests through Airbnb or Couchsurfing as we do on hotels that host hundreds of people a night?

The focus on regulating the sharing economy also misses deeper problems with how the sharing economy is managed mostly by for-profit companies.  There are huge economies of scale in online platforms for sharing and redistributing goods.  The “market” is unlikely to produce a serious rival to Craigslist, eBay, Airbnb, Couchsurfing, or Uber.  Platforms are most useful when everyone uses the same one for any type of transaction, so individuals cannot easily switch to a rival platform unless many others do too.  These network externalities have serious implications for the economics of the sharing economy.  First of all, the returns to innovating in this area are very unequal: in most cases, one platform will thrive, and all the rest will fail.

Second, once any sharing economy platform is dominant, it does not need to be very responsive to its users.  Natural monopolies have little incentive to adopt policies that protect the safety and privacy of their users.  Dominant platforms can also demand a large cut of the gains arising from any transaction.  It isn’t clear that this is happening yet.  Most Craigslist posts are free.  Airbnb currently charges guests a 6-12% fee and hosts a 3% fee, which may represent reasonable compensation for Airbnb’s costs.  However, there is little reason that dominant platforms could not start charging users higher fees if they wanted to — and as more of these companies go public the pressure to do so will increase.

Third, and perhaps most problematically, the corporatization of the sharing economy can undermine the very trust on which these new forms of cooperation are built.  David Bollier argues that this is essentially what happened when Couchsurfing abandoned its non-profit status:

“When the new corporate owners and investors came on board, all of the accumulated social equity and goodwill created by Couchsurfers was essentially monetized.  A great opportunity to create a new organizational form on a vast scale was lost.”

What is the solution to all of this?  Instead of simply regulating the sharing economy we should democratize the sharing economy.  There are two key elements to this strategy.  First we should provide greater public funds to sharing platforms, at least in their early stages.  Social entrepreneurs face large obstacles in raising funds to set up user-friendly, scalable sites, and huge incentives to sell thriving sites to the highest bidder.  If the public paid more of the start-up costs — through donations, foundations, and government — we would receive more useful, and more socially responsible platforms.

Second, the people who use these sites should have more say about how these platforms facilitate transactions, protect privacy, and ensure safety.  Since people cannot effectively vote with their feet in the sharing economy, the structure of these online platforms should be made more responsive to members’ needs.  Americans already vote on how we share roads, parks, and library books, so there is no reason we cannot vote on how we share lodging, rides, and our stocks of shareable goods.  Established platforms may resist democratizing their operations, but new platforms may embrace more democratic decision-making, especially if donors, foundations, and governments made it a requirement for receiving funding.

The greatest problem with the sharing economy is not that it is unregulated, but that it is undemocratic.  There is certainly a role for government regulation.  For, example, governments could decide to charge Airbnb the same fees they charge hotels.  But governments cannot and will not regulate many important, details that govern how these platforms operate.  To improve these internal policies, we should recognize that people who use online platforms are not just “users” but rather active participants in a new movement that may radically improve how we consume goods.  Members of online platforms should be given some power to determine the structure of their interactions.  The success of the corporate sharing economy suggests that a democratic sharing economy could be truly transformative.  Instead of merely regulating corporate platforms, popular economists should address how we can build democratic platforms for sharing goods, reducing waste, and building community.

[popularecon]

By Tim Koechlin

  Across the country, Republican legislatures— encouraged and financed, as usual, by corporate money and right wing think tanks— have undertaken a stunning array of initiatives designed to weaken unions and otherwise undermine American workers.   Scott Walker of Wisconsin, along with several other Republican governors, has moved aggressively and conspicuously to disempower public sector unions.  Nikki Haley, the Republican Governor of South Carolina, recently declared that unionized businesses are not welcome in South Carolina.

Republicans tell a tired, cynical story about all of this, insisting that union busting is, somehow, good for the economy and good for workers.   It’s the same old trickle down nonsense.

Democrats, on the other hand, have done too little to defend unions and worker rights.

This systematic attack on unions is, of course, bad for working Americans.  Unionized workers in the US earn more money than non-union workers with similar skills (14% more, according to the Economic Policy Institute).   Unionized workers are 28% more likely to have employer provided health insurance and 54% more likely to have employer provided pensions.  Unionized workers enjoy more vacation time, and they are more productive than non-union workers.   Countries with high rates of union coverage enjoy lower rates of inequality and lower rates of poverty, and their workers enjoy greater economic security.   And, further, a robust union movement raises pay and working conditions for non-union workers as well.

What’s not to like?

In 1973, 27% of US workers were unionized.  Now, it’s just 13% — the lowest rate among the world’s rich (“industrialized”) countries.   It is no coincidence that the U.S. is, by every reasonable measure, the most unequal of the world’s rich countries.

Since 1979, the share of income going to the top 1% in the U.S. has grown by more than 300%.  Meanwhile, wages have stagnated – and, for many millions, declined — even as labor productivity (the value of a worker’s output in an hour) has more than doubled!   In 1978, CEOs earned 26 times more than a typical worker.  In 2013, CEOs at the largest 350 U.S. corporations earned 296 times more than a typical worker!   This stunning and appalling redistribution of income – economy-wide, and within corporations — is in part the result of massive tax cuts for the rich and the erosion of corporate accountability (aka “deregulation”).   It is also the result of a systematic effort to undermine the bargaining power of US workers.   Union busting has enriched capitalists at the expense of workers.

The Right insists that working class Americans are falling behind because of overly-generous “entitlements” and overpaid public sector employees.   In reality, the lost income of workers of all sorts – union and non-union, black and white, male and female, public sector and private sector – can be found in the pockets of the 1%.

A hundred years ago, U.S. workers— including millions of children— worked long hours for low wages in unsafe workplaces.   Because of organized labor, the prospects for working Americans improved dramatically over the course of the 20th Century.  Because of unions, millions of U.S. workers were able to achieve a middle class life – economic security, home ownership, health insurance, vacation time and, perhaps, a college education for their children.   From 1948-1973, the incomes of working class families in the US nearly doubled!

In addition to higher wages, the struggles of organized labor have delivered virtually everyprotection and benefit enjoyed by U.S. workers.  Unions have brought working Americans the 40 hour week, paid vacation, Social Security, Medicare and Medicaid, overtime pay, child labor laws, the Occupational Safety and Health Act, whistleblower protection laws, sexual harassment laws, lunch breaks and coffee breaks, wrongful termination protection, sick leave, the Americans with Disabilities Act, the weekendand much more.  These rights, benefits and norms were not gifts from employers.  They are the result of relentless organized struggle by working Americans.   And with each struggle, big business and its apologists have insisted that this change would fatally undermine their competitiveness.

As unionization rates have fallen over the past several decades, wages have stagnated and the “American Dream” has drifted out of reach for millions.   The Economic Policy Institute estimates that plummeting rates of unionization account for one third of rising inequality in the US since 1980.

Raising the pay of working Americans has to be at the top of a progressive agenda.  And this means we have to prioritize the empowerment of the labor movement.

Are high rates of unionization possible in a global economy?  Yes!   Union coverage remains high in most European countries— over 90% in some cases— and union coverage has grown steadily over the past few decades in several countries.    In a marvelous study of 21 rich countries, John Schmitt and Alexandra Mitukiewicz show that changes in unionization rates since 1960 have had little to do with globalization or changes in technology.  They depend, rather, on a country’s “broad political environment.”    Social Democratic countries have seen unionization rates rise.   “Liberal market economies” (the US, UK and others) have seen unionization rates drop.   De-unionization is not an imperative of the global market.   It is a political choice.

But aren’t unions prone to corruption?   Sometimes (although way less often than right wingers would have us believe).   And some parents are abusive.   Some doctors commit fraud.   And some bankers are greedy and mendacious.    It does not follow that we’d be better off without families, doctors, or a financial sector.   Nor does it follow that workers are better off without unions.

The US has long been a hostile environment for unions, and this has been especially true since 1980, when the Reagan administration declared war on organized labor.  Cornell’s Kate Bronfenbrenner has chronicled the increasingly aggressive (and often illegal) tactics used by employers to block organizing efforts, and the meager protections available to organizers and workers.

The Republican Party’s economic policy agenda has not changed for decades.   Cut taxes for the 1%.  Deregulate— so that banks can run wild and corporations can pollute with impunity.  And undermine the bargaining power of workers.  Union busting is central to the Republican brand.

Working class Americans have been losing ground for 35 years.  To reverse this, we need a re-empowered and a re-legitimized labor movement. We need to tell the truth about unions and union busters.  We need to actively support our allies in the labor movement, and we need to demand that our representatives work to create a political and legal environment that facilitates the growth of unions and union representation.

And, relentlessly, we need to ask our representatives— especially fearful, cautious, and misguided Democrats:  Which side are you on?

Unions are good for workers.   It’s that simple.

[popularecon]

by Matson Boyd

I’m a big supporter of Kshama Sawant, as these pieces will attest, so it is with concern that I read her position on urban planning in Seattle. Sawant voted to lower the height limit on new houses on small lots, and that might be fine within the context of a radical vision for urban policy, but her comments make it clear that she is taking a fairly orthodox position in support of homeowners. Sawant said that “Big developers have been pushing working-class Seattle residents around for years,” as if owners of half-million dollar homes were downtrodden workers. (The median home price in Seattle is $452,000). Homeowners are actually a very powerful group, and they own the greatest stock of capital in most big American cities. And homeowners block the actual working class from moving into their neighborhoods, not to mention fighting to keep homeless shelters from being built nearby. A truly progressive vision of a city — a place that houses the low-income and the homeless, and that provides core amenities to all regardless of income — will never become a reality unless progressives learn to challenge developers and homeowners alike.

Its not hard to see why homeowners put so much effort into excluding others from their neighborhoods. For many of them, the bulk of their net worth is in the value of their homes, and protecting that value is fundamental. Added density in a neighborhood? Bad for the value of a house. Low-income neighbors? Very bad for the value of a house. A nearby transition home for the homeless? Incredibly bad for the value of a house. Often, though not always, preservation and the environment are mere pretexts to use in the fight to preserve the value of their homes. And alarmingly, these pretexts are often enough to lure progressive folks into homeowners’ exclusionary politics.

To start envisioning what radical urban planning should look like, we should take another look at what life is like now in booming American cities like San Francisco, Seattle, and New York. Millions of people are currently at risk of being displaced to the suburbs. Some low-income twenty-somethings can temporarily escape this by living in cramped, informal arrangements, but for the vast majority of low-income people city rents are simply unaffordable. Instead they must live in the distant suburbs and commute daily— sometimes hours per day— so that they can serve the wealthier inhabitants of the city. These people are typically given no rights in city politics, but it must be a central mission of progressive urban planning to provide them with the option of living at a reasonable distance from where they work, and near all the other amenities of city life.

We know a few other things that can structure our vision: (1) a flexible housing supply enables people to live where they want, find jobs, and live better lives, (2) density is fabulous for the environment, jobs, and low-income people, and (3) being poor doesn’t hold people back nearly as much as being from a poor neighborhood. This suggests that dense mixed-income neighborhoods could substantially reduce the devastating multi-generational effects of poverty.

But its not as simple as just letting the market add supply. Left to their own devices, developers only build for the top of the market. So some combination of public housing and requirements for developers is necessary. Currently Seattle has some policies meekly pushing towards denser, mixed-income neighborhoods. A housing levy has financed a modest 3700 units over the last 12 years, and “incentive zoning” has created a mere 616. Seattle’s incentive zoning requires developers to either 1) build under a height limit, 2) add affordable units, or 3) pay into a city fund that will build those units elsewhere. Most choose to build under the height limit, and thus add fewer units. And those that build taller buildings usually choose to pay into the fund and the units are added on the poor southern edge of the city. So of the 3 options, only one leads to mixed-income communities, and it is by far the least chosen.

To get this policy right, developers need to be pushed so that every new development includes affordable units. But even if this is corrected, a tougher problem awaits: homeowners fight against attempts to build denser, mixed-income neighborhoods. No radical vision for a progressive city can become a success until those homeowners are challenged.

[popularecon]

By Matson Boyd

This past week, Seattle’s City Council voted to raise the minimum wage to $15 an hour. This move will raise the living standards of thousands of low wage families, and it marks a triumph for Socialist councilor Kshama Sawant and her coalition of $15-Now activists. What’s next around the country in the minimum wage fight? And what can activists learn from the Seattle victory?

Sawant and 15-Now succeeded, not because they elected a slate of politicians, but because they built such a groundswell of grassroots support that no politician could survive by opposing them. The city council vote on Monday was 9 to 0. Raising the minimum wage has popular support almost everywhere around the country, what’s needed is for that support to be organized and articulated into a specific policy proposal. This happened in Seattle in the most recent election and it forced politicians to take a stand. Those who hedged on the proposal or avoided the topic lost, those who made their support clear, won. In her victory speech, Sawant said it best. “What was voted on in the city council was a reflection of what workers and the labor movement won on the street over this last year.”

Activists are already at work taking this approach to other cities.  Progressive bastions like New York and San Francisco are booming, yet life is hard for low-wage working families, which makes them the front lines in the fight for living wages. Seattle provides several lessons: don’t get caught up in neoliberal rhetoric, don’t be afraid to work outside the Democratic Party, and don’t be afraid to go big.  Despite her training as an economist, Sawant was careful not to frame everything in terms of its effect on business. With every policy detail she focused on the effects on working families. And Seattle’s efforts were led by Socialists, which pulled the Democrats to the Left. Similarly this past week New York’s Working Families Party extracted promises from Governor Cuomo to raise the New York minimum wage to $10.10. They’ve threatened Cuomo that they’ll back a challenger if he reneges, and if they can make that threat credible, they might just get their way.

How High Can We Go?

The $15 proposal drew constant press attention in Seattle in part because it was so bold. And the new $15 standard in Seattle will be an excellent test of how much room we have to raise the minimum wage. Many of the supporters believe that it doesn’t matter if there are some job losses: the gains in workers’ quality of life will more than offset any loss of employment. And there’s good reason to believe that there will be little to no job losses. Arin Dube has done the most comprehensive studies on the effects of raising the minimum wage.  Like many economists, he compares the minimum wage proposals to the local median wage to assess the “bite” of the policy. Dube notes that the $15 minimum in Seattle is 59% of the local median wage, and that this is still lower than the percentage in France (62% of the French median wage) and New Zealand (60%). And, by this measure, the Seattle proposal is not much higher than the federal minimum wage was in 1968, when it was was $10.60 an hour in today’s dollars and 55% of the median wage.

In comparison, President Obama’s proposal to raise the minimum wage to $10.10 isn’t so radical, but it’s nonetheless a great idea. Raising the minimum wage to $10.10 would lift millions out of poverty, and it’s an extremely popular proposal. Even 62% of Republicans support it. As is often the case, Republican politicians differ from their constituents, and Congress remains gridlocked. But in cities and states across the country there remains substantial room, both politically and economically, to raise the minimum wage. Eight states have already raised their minimums so far this year. And cities like New York and San Francisco have plenty of room to raise their minimum wages before they get anywhere near the 59% of the median Seattle has reached. Before long, we might see huge increases in the minimum wage in several more cities, if folks remember the lessons of Seattle: don’t get caught up in business rhetoric, don’t be afraid to work outside the Democratic Party, and don’t be afraid to go big.

[popularecon]

Typically each summer, the Center for Popular Economics puts on its Summer Institute. This year however, we are switching gears and formats, and invite you to join us in our brand new Summer Workshop Series! Please join us for weekly workshops, from June 7th through August 9th, giving CPE’s critical analysis of current issues in the economy and looking at economic alternatives.

Here at the CPE Blog, we’ll give a short introduction to each week’s session through the summer. For now, an overview:

Schedule

Workshops are open to all and will take place throughout the summer inSpringfield, MA at the Pioneer Valley Central Labor Council at 640 Page Boulevard. All workshops will happen on Saturdays from 2-5pm. Light refreshments will be provided.

Saturday June 7: Introduction to CPE’s Political Economy Analysis **(suggested pre-requisite for all workshops)

Saturday June 14: 35 Years of Worsening Labor Conditions- What Can We Do About It?

Saturday June 21: Higher Education in Neoliberal America

Saturday June 28: Local Food, Good Jobs

Saturday July 12: Capitalism and the K-12 School System

Saturday July 19: Global Political Economy of Trade and Immigration

Saturday July 26: National Single Payer Health Insurance- Can We Afford Anything Less?

Saturday August 2: Household Debt, the Foreclosure Crisis, and Resistance

Saturday August 9: Can We Cooperate Out Of This Mess?

A full list of titles, descriptions, dates, and teachers is available here.

Registration Info

To cover labor and overhead costs, each workshop has a suggested donation of $25 per person, with a minimum of $10. For those registering for the entire series, we suggest a $200 donation, with a minimum of $75. For groups and organizations registering 3 or more participants, we suggest an organizational rate of $50 per person. Payment information is available on the registration link.

To register for the workshops, please click this registration link

After registering, you can also RSVP to our Facebook event

For questions, please contact programs {at} populareconomics(.)org

[popularecon]

By Matson  Boyd

This past November, after Boeing threatened to leave Washington State, the state passed a bill to give Boeing the largest tax break any state has ever granted a company: $8.7 billion from now until 2040. Boeing wasn’t in financial difficulty. In fact, in December they gave $10 billion back to shareholders in the form of a stock buy-back. Instead it was relatively routine extortion, part of the accelerating race to the bottom that has transferred massive wealth from communities to corporations. Most analysts acknowledge that this is an absurd situation, the only divide is between those who think there is nothing we can do, and those who say it is time to take a stand.

Seattle City Councillor Kshama Sawant (Wikimedia Commons)

Newly elected Seattle councilor Kshama Sawant is among those taking a stand. She recently argued:

The only response we can have if Boeing executives do not agree to keep the plant here is for the machinists to say, ‘the machines are here, the workers are here, we will do the job, we don’t need the executives.’ The executives don’t do the work, the machinists do.

This drew a rebuke from Matt Yglesias in a post titled “Socialism off to a Poor Start in Seattle”:

Can Boeing’s front-line workers actually retool an airplane factory and turn it to bus production and win contracts to sell buses that raise enough revenue to keep everyone employed? Only time will tell for sure, but in the real world the answer is “no.” This is exactly what you need executives for. Retooling plants, establishing relationships with suppliers and customers, understanding the size of the market for buses, and all that other stuff is a nontrivial task.

Yglesias is correct that Sawant is too dismissive of the necessary work of management, but in his effort to discredit Sawant he misleadingly lumps together the management of a company with the control of a company through ownership stakes. It doesn’t make sense to justify the existence of a predatory group of shareholders by saying that the workforce needs managers; managers and shareholders are two different things. And it is certainly possible, though by no means easy, that Washington State or the Boeing workers could take over the ownership of the facilities and still hire managers.

We’ve allowed this extortion to develop by legitimizing whatever activities corporations find to be profitable and delegitimizing any attempt by the state or workers to take some power back. It’s time to take alternatives seriously, instead of blithely dismissing them as Yglesias does. These alternatives could be anything from stronger unions, to worker representation on boards, to norms that prevent corporations from extorting communities, to a tolerance for state industrial development that provides a fallback to workers when companies leave. The list could go on, we must stop saying there is nothing we can do.

In fairness to Yglesias, he himself is aware of the absurdity of the giant giveaways to corporations. In a more recent piece, after reviewing Boeing’s demands for a site “at no cost, or very low cost” and for a facility at “no cost, or significantly reduced cost”, he wrote:

If your strategy for attracting the construction of an airplane factory to your town includes footing the entire bill for an airplane factory, then you might as well just launch an airplane manufacturing company.

I think he’s on to something.

[popularecon]

By Susan Holmberg

It’s proxy season again, and we will soon be deluged with news profiles of CEOs living in high style as our ongoing debate on CEO pay ramps up. The floodgates opened on April 12th, when the New York Times released its annual survey of the 100 top-earning CEOs. Lawrence Ellison from Oracle Corporation led the list again with over $78 million in mostly stock options and valued perks, an 18 percent drop in pay from last year. Poor Larry.

Rising CEO pay has been a hugely contested issue in the U.S. since the early 20th century, particularly in the midst of economic downturns and rising inequality (these two often go together). Because the numbers are just so staggering, most of the current debate focuses on the rapid rise in CEO pay over the past four decades. While executive pay remained below $1 million (in 2000 dollars) between 1940 and 1970, since 1978 it has risen 725 percent, more than 127 times faster than worker compensation over the same period.

With any luck, ascendant French economist Thomas Piketty and the English-language release of his book Capital in the Twenty-First Century will build much-needed momentum in D.C. to institute reforms that address our CEO pay problem. This is a major driver of America’s rising income inequality, which is the central focus of Piketty’s magnum opus. One reform in particular that is critical to slowing down the growth of CEO pay and its costly impact on our economy is closing the performance pay tax loophole.

Inspired by compensation guru Graef Crystal’s bestseller on corporate excesses and skyrocketing executive pay, then-presidential candidate Bill Clinton elevated CEO pay as a core issue of his 1992 campaign with a pledge to eliminate corporate tax deductions for executive pay that topped $1 million. Clinton was successful only in part; his policy did become part of the U.S. tax code  as Section 162(m), but it came with a few unfortunate qualifiers, namely the exception for pay that rewarded targeted performance goals, or “performance pay.”

The logic of performance pay comes from Chicago-school economists Michael C. Jensen and Kevin J. Murphy, who published a hugely influential piece in the Harvard Business Review in the early 1990s that argued executive pay should align CEO interests with what shareholders care about, which is higher stock prices. Otherwise known as agency theory, this idea has profoundly shaped the executive pay debate and is arguably the primary reason the performance pay loophole made it into the tax code.

Once Section 162(m) became law, what do you suppose happened next? Predictably, companies started dispensing more compensation that qualified as performance pay, particularly stock options. Median executive compensation levels for S&P 500 Industrial companies almost tripled in the 1990s, mainly driven by a dramatic growth in stock options, which doubled in frequency.

Most of us think of skyrocketing CEO pay as simply a moral problem. However, economists like Piketty and my Roosevelt Institute colleague Joseph Stiglitz have been expounding about the havoc that rising income inequality wreaks on our economy (and democracy). When middle-class wages stagnate, consumer demand diminishes, which has tremendous spillover effects in terms of investment, job creation, tax revenue, and so forth. That particular set of problems relates to how much CEOs are paid. But there are also costly problems with the structure of CEO pay, i.e. what they’re paid with.

Performance pay can (and has) made executives very wealthy, very quickly, which creates incentives for shortsighted, excessively high-risk, and occasionally fraudulent decisions in order to boost stock prices. What kind of effect does this behavior have on the economy at large? Think mortgage crisis and subsequent global financial meltdown. Performance pay also diminishes long-term business investments. According to William Lazonick, in order to issue stock options to top executives while avoiding the dilution of their stock, corporations often use free cash flow for stock buybacks rather than spending on research and development, capital investment, and increased wages and new hiring.

All this and Americans get the bill. Beyond the innumerable costs we’ve borne from the recent economic crisis, the Economic Policy Institute calculated that taxpayers have subsidized $30 billion to corporations for the performance pay loophole between 2007 and 2010. According to a recent Public Citizen report, the top 20 highest-paid CEOs received salaries totaling $28 million, but had deductible performance-based compensation totaling over $738 million. Assuming a 35 percent tax rate, that’s a $235 million unpaid tax bill. The Institute for Policy Studies calculated that during the past two years, the CEOs of the top six publicly held fast food chains “pocketed more than $183 million in performance pay, lowering their companies’ IRS bills by an estimated $64 million.”

Congress is long overdue to close the performance pay loophole. The Supreme Court just made that harder. Thanks to Citizens United and now the McCutcheon decision, the same CEOs who are benefitting from the loophole are much freer to draw upon the corporate coffers to donate big money to politicians to maintain these loopholes.

Nevertheless, there is potential for getting it done. Senators Blumenthal (CT) and Reed (RI) have introduced the Stop Subsidizing Multi-Million Dollar Corporate Bonuses Act (S. 1476), which would finally end taxpayers’ subsidies to CEOs by closing the performance pay loophole and capping the tax deductibility of executive pay at $1 million. In the House, Rep. Lloyd Doggett (D-Texas) has introduced a companion bill, HR 3970.

There are many policy ideas for how to curb skyrocketing CEO pay. Piketty and his colleague Emmanuel Saez argue for a much higher income tax rate for top incomes. (The growth rate of CEO pay was at its lowest when the U.S. had confiscatory tax rates for the very rich.) In the current political climate, a more viable step toward slowing the growth of CEO pay and the damage it does to our economy is to, at long last, close the performance pay loophole. It should never have been there in the first place.

Article originally posted at the Roosevelt Institute’s Next New Deal blog. Susan Holmberg is a member of the Center for Popular Economics and a fellow and research director at the Roosevelt Institute.

[popularecon]

By Danish Khan

The recent speech by the new Chair of the Federal Reserve, Janet Yellen, was remarkable in multiple ways. First of all, Ms. Yellen acknowledged that working people are still suffering from the recent economic crisis and the recovery is at best incomplete. She also gave a precise number of the unemployment rate that can be sustained while maintaining a stable inflation rate, and in her estimates that number is around 5.2 percent to 5.6 percent. This number is simply too high, it should not be more than 4.0 percent. In simple terms, by accepting 5.2 percent to 5.6 percent, she is saying that if the number of unemployed people gets down to 8 million people out of the 155 million who are in the labor force, then the Federal Reserve will have achieved its ultimate target. I think the Madame Chair should be reminded that the primary task assigned to the Federal Reserve, as far back as the 1940’s, is to achieve full employment.

Yellen surprised most of us when she stated the following: ‘’our (Federal Reserve) goal is to help Main Street, not Wall Street”. This statement is historic in itself. I would certainly not contest her good intentions to do her best to create employment opportunities for the millions of unemployed Americans, but apparently there are no immediate signs of a radical shift in the Federal Reserve policies. Time will tell whether Yellen lives up to her words, or instead ends up as a disappointment like President Obama. Furthermore, folks on Wall Street were not moved by her statement, the reason is obvious, they have their folks in Washington to protect their vested interests. But the real question is can the Federal Reserve alone create more employment through monetary policy? The answer is very simple: No. In the economic downturn, like the one in which are stuck, it is impossible to jump start the economy simply through monetary policy, i.e. by changing interest rates. In economic jargon it is called ‘liquidity trap’, meaning simply that the interest rate (federal funds interest rate) is so low that the Federal Reserve can’t lower it further to stimulate investment. In such a situation, monetary policy becomes very ineffective, therefore the government must intervene through an increase in Government spending.

The federal and state governments can invest in many projects, for example, public education, green energy, public transportation and infrastructure, to name a few. This is a very pragmatic and feasible solution and it will not only increase total output and employment in the economy, but it will also benefit the larger society and our environment for decades to come. But this brings up another question: how should the government fund these programs? Isn’t the budget deficit already too high? I would address the second question first, yes, the budget deficit is quite high, and therefore, the government should increase revenue by not only fixing the tax loopholes but also by increasing the tax rate on giant corporations. Apparently, there are no such plans on the ‘to-do’ list of the Obama administration. Can President Obama, in his second term with the newly appointed Janet Yellen, challenge the hegemony of Wall Street? My answer is no. For these policies to be realized, we need a government which can represent the interest of the larger society and not just the few at the top. History tells us that pro-Main Street changes are never enforced from the top; they are gained after long hard battles by folks at the grass-roots level. Thats where we need to win our democracy back.

[popularecon]

By Ricardo Fuentes-Ramírez

Many activists have turned to developing and supporting Worker Cooperatives as a fundamental part of building alternatives to our current system. In one of his recent books, economist Richard Wolff explains that there are many types of cooperatives, and activists should specifically coalesce around those that are “workers’ self-directed enterprises,” or WSDEs. Not all worker-owned enterprises, worker-managed enterprises, or cooperatives are necessarily WSDEs. In some worker-owned enterprises, worker/owners simply leave the directing of the enterprise in the hands of a board of directors. Worker-managed enterprises are usually firms in which owners give more control to workers while expecting more profits or growth, serving the interests of the former, not the latter. Finally, cooperatives include a wide variety of institutions, including firms for cooperative purchasing or selling. Many cooperatives are simply groups of small capitalists purchasing inputs cooperatively. To be considered a WSDE, the appropriation and distribution of the product of the workers’ labor has to be done cooperatively, and the workers who cooperatively produce it are identical to those who cooperatively appropriate and distribute it. In these firms, workers collectively determine what the enterprise produces, the appropriate technology, the location of production, and all related matters. For Wolff, these types of worker cooperatives are the building blocks for a future alternative system.

Wolff believes that if WSDEs organize mutual support and sufficient political strength, they might prevail in competition with capitalist firms. To ensure their growth and role in transforming society, Wolff delineates five main strategies. The first is to struggle for a government job program that provides founding capital to workers willing to commit to building WSDEs. He explains that “learning from and adapting the example of Italy’s very successful 1985 Marcora Law, which enabled workers to take over enterprises that were in crisis, the US government could offer unemployed workers a similar choice.” This includes providing government support for these WSDEs, such as technical assistance, subsidized or guaranteed credit access, temporary tax exemptions, preferential purchasing of WSDE goods and services, or requiring product labels to reflect the organization of their production, so consumers could recognize and choose WSDE products.

The second strategy is to seek alliances with the existing cooperative movement —for example, to create joint campaigns for a US version of the Marcora Law and to ease tax burdens on existing cooperatives. Third, seek an alliance with the trade union movement that coalesces around WSDEs developing alongside unions’ struggles against capitalist employers. Fourth, develop the organic intellectuals of the WSDE movement, that is, people who believe in WSDEs as instruments of social change, and are inclined and skilled enough to find effective means to communicate their beliefs and thereby build such a movement. Wolff argues “the program for increased WSDEs needs to support and build—in universities, labor unions, social movements, and beyond—the meetings, discussions, courses, and centers that can generate and train organic intellectuals.”

The last strategy Wolff mentions is to aspire toward the creation of a “new independent political party that will contest for governmental power to accomplish social change, with WSDEs as a major component.” This strategy is perhaps one of the most, if not the most important, among those discussed. For example, some activists interested in workers cooperatives apply what David Harvey has called a “termite theory.” That is, they believe worker cooperatives can gradually grow and replace capitalist firms, eating away at the institutional and material supports of capital until they collapse. The problem, for Harvey, “is not lack of potential effectiveness; it is that, as soon as the damage wrought becomes too obvious and threatening, then capital is both able and all too willing to call in the exterminators (state power) to deal with it.” Furthermore, worker cooperatives depend on flows from and towards financial and commercial institutions, which operate under a completely different logic. Even if they do survive this hostile environment, it would be by gradually mimicking the behavior of capitalist firms. In other words, it is fundamental that worker cooperatives, as well as WSDEs in particular, be conceived as political instruments, of education and organization, used towards the creation of a new independent political party that will contest for governmental power to accomplish social change. This way, the transformative power of worker cooperatives may be preserved and reinforced, and the prospects for change are better rooted as well.

For more on creating or supporting WSDEs, visit the Democracy at Work Website.

[popularecon]

By Sara C. Kingsley and Dr. Mary L. Gray

Ray and Charles Working on a Conceptual Model for the Exhibition Mathematica, 1960, photograph. Prints & Photographs Division, Library of Congress (A-22a)

“Certainly the cost of living has increased, but the cost of everything else has likewise increased,” H.G. Burt, the President of the Union Pacific Railroad, asserted to railroad company machinists and boilermakers.  For Burt, the “cost of everything else” included the cost of labor. His remedy: place “each workman on his [own] merit.”  In 1902, “workman merit” to a tycoon like H.G. Burt squarely meant equating the value of labor, or the worth of a person, to the amount of output each individual produced.  Union Pacific Railroad eventually made use of this logic by replacing the hourly wages of workers with a piece rate system.  Employers switched to piecework systems around the turn of the 19th century largely to reduce labor costs by weeding out lower skilled workers, and cutting the wages of workers unable to keep apace with the “speeding up” of factory production.  

Employers historically leveraged piecework as a managerial tool, reconfiguring labor markets to the employers’ advantage by allowing production rates, rather than time on the job, to measure productivity.  Whatever a person produced that was not quantifiable as a commodity, in other words, did not constitute work.  We’ve seen other examples of discounted labor in spaces outside the factory.  Feminist economists fight to this day, for example, for the work of caregivers and housewives, largely ignored by mainstream economic theory, to gain recognition as “real” forms of labor.  Real benefits and income are lost to those whose work goes unaccounted.

As the historical record shows, workers do not typically accept arbitrary changes to their terms of employment handed down by management.  In fact, the Union Pacific Railroad machinists protested Burt’s decision to set their wages through a piecework system.  H.G. Burt met their resistance with this question: is it “right for any man to ask for more money than he is actually worth or can earn?”

But what is a person truly worth in terms of earning power?  And what societal, cultural, and economic factors limit a person from earning more?

In 2014, the question of a person’s worth in relation to their work, or the value of labor itself, is no less prescient.  The rhetoric surrounding workers’ rights compared to those of business differs little whether one browses the archives of a twentieth century newspaper or scrolls Facebook posts.  Ironically enough though, in the age of social media and citizen reporting, the utter lack of visibility and adequate representation of today’s workers stands in stark contrast to the piece rate workers of H.G. Burt’s day.  Few soundbites or talking points, let alone byline articles, focus on the invisible labor foundational to today’s information economies.  Nowhere is this more clearly illustrated than with crowdwork.

Legal scholar Alek L. Felstiner’s defines crowdworking as, “the process of taking tasks that would normally be delegated to an employee and distributing them to a large pool of online workers, the ‘crowd’” (2011).  Hundreds of thousands of people regularly do piecework tasks online for commercial, crowdsourcing sites like Amazon.com’s Mechanical Turk (“AMT”).

Over the last year, we’ve worked with Dr. Siddharth Suri and an international team of researchers, to uncover the invisible forms of labor online, and people who rely upon digital piecework for a significant portion of their income.  Crowdwork is, arguably, the most economically valuable, yet invisible, form of labor that the Internet has ever produced.  Take Google’s search engine for instance.  Each time you search for an image online (to create the next most hilarious meme, or find a infograph for a conference presentation) you’re benefitting from the labor of thousands of crowdworkers who have identified or ranked the image your search populates. While this service may be valuable to you, the workers doing it, only receive a few cents for their contributions to your meme or slideshow presentation.  Additionally, a typical crowdworker living in the United States makes, on average, 2 to 3 dollars an hour.  We need to ask ourselves: what is fair compensation for the value that workers bring to our lives?  How would you feel if tomorrow, all your favorite, seemingly free, online services that depend on these digital pieceworkers, disappeared?

Last fall, we spent four months in South India talking with crowdworkers and learning about their motivations for doing this type of work.  In the process we met people with far ranging life experiences, but a common story to tell – perhaps familiar to all of us who’ve earned a wage for our keep: work is not all we are, but most of what we do is work.  And increasingly, the capacity to maintain a living above the poverty line is elusive, and complicated by what “being poor” means in a global economy. Our hopes for finding more satisfying work, a life valued for what it is rather than what it is not — is no less, even as we confront the realities of today.  

Moshe Marvit spoke to the complexities of crowdwork as a form of viable employment in a compelling account of U.S. workers’ experience with Amazon Mechanical Turk. He describes this popular crowdsourcing platform as “one of the most exploited workforces no one has ever seen.” Marvit emphasizes how crowdwork remains a thing universally unacknowledged, in that more and more tasks, from researchers’ web-based surveys and to Twitter’s real-time deciphering of trending topics, depend on crowdwork.  However, most people still don’t know that behind their screen is an army of click workers.  Anyone, who has ever browsed an online catalogue or searched the web for a restaurant’s physical address, has benefited from a person completing small, crowdworked task online.  Pointedly, our web experience is better because of the thousands of unknown workers who labor to optimize the online spaces we employ.

As Marvit points out, and our research also notes, people only earn pennies at a time for doing the small crowd tasks not yet fully automatable by computer algorithms. These crowd tasks, however, add up to global systems whose monetary worth sometimes trumps that of small nations.  Yet, when we ask our peers and colleagues, “do you know who the thousands of low income workers are behind your web browser?”  We receive mystified stares, and many reply “I don’t know.”

The hundreds of thousands of people who regularly work in your web browser are not the youth of Silicon Valley’s tech industry.  They likely cannot afford Google glass, or ride to work in corporate buses.  Some are college educated, but, like people today – they are stuck in careers that undervalue their real worth, in addition to discounting the investments they’ve already made in their education, skills, and the unique set of values they’ve gained from their own life experiences.  

Yet, the more our research team learns about crowdworkers’ lives, the more we realized how little we know about the economic value of crowdwork and the makeup of the crowdworking labor force. And as Marvit notes, we still don’t have a good grasp of what someone is doing, legally speaking, when they do crowdwork. Should we categorize crowdwork as freelance work? Contract labor? Temporary or part-time work?

In the absence of answers to these questions, some have called for policy solutions to mitigate the noted and sometimes glaring inequities in power distributed between those posting tasks (or, jobs) to crowdwork platforms, and those seeking to do crowdwork online.  But, we argue, good labor policy that makes sense of crowdwork, from a legal or technical point of view, can’t be adequately drafted until we understand what people expect and experience doing task-based work online. Who does crowdwork? Where, how, and why do they do it? And how does crowdworking fit into the rest of their lives, not to mention our global workflows? When we can answer these questions, we’ll be ready to talk about how to define crowdwork in more meaningful ways. Until then, we resist dubbing crowdwork “exploitative” or “ideal,” because doing so is meaningless to the millions of people who crowdwork, and ignores the builders and programmers out there trying to improve these technologies.

We are all implicated in the environments we rely on and utilize in our daily lives, including the Internet.  Those who mindlessly request and outsource tasks to the crowd without regard to crowdworkers’ rights, are perhaps, no more at fault than the rest of us who expect instant, high quality web services every time we search or do other activities online.  An important lesson from Union Pacific Railroad still holds true: workers are not expendable.

[popularecon]

By Danish Khan

Most economists would describe contemporary times as an epoch of austerity. Whether it is public education or healthcare, enormous pressure has been exerted by the right wing to cut government spending in order to reduce the budget deficit. But interestingly, advocates of austerity always pick those social programs for spending cuts which are directly related to the lives of working people in America, e.g. unemployment insurance, food stamps, subsidized student loans, etc.. The supporters of the austerity try to portray themselves as sincere in ensuring the reduction in government spending but the reality is they are only interested in waging class war against working people of America.

Pro-austerity economists and politicians never bother to tell the American public that the United States government has spent $23 billion on spy planes commonly known as drones in the last couple of years. Each drone (Global Hawk drone planes) that the federal government purchases costs taxpayers $218 million. If that money would have been spent on subsidized student loans, then these austerians would have declared it a crime against humanity. The obvious contradictions evident in the politics of the right-wing can be summed up in the following manner: when it comes to rebuilding the crumbling local infrastructure or investing in public education, green energy and transportation, right-wing politicians tell the American public that the government does not have money to spend on these programs— but the same politicians cheer when huge sums of cash are advanced to purchase drones.

The economic aspects of drones are only one issue but the political and human tragedy that is associated with drones is unspeakable. Apparently, the Obama administration is so busy in droning other nations that it has completely forgotten its promises of bringing change and rebuilding America. The bad PR of Obama’s administration’s foreign policy has gotten worse.  Just a couple weeks ago, on February 27, the majority (534 to 49) of the members of the European Parliament voted in favor of a resolution that stated the following:

“…drone strikes by a State on the territory of another State without the consent of the latter constitute a violation of international law and of the territorial integrity and sovereignty of that country.”

The resolution also demanded European Union Member States not “perpetrate unlawful targeted killings or facilitate such killings by other states” and called on them to “oppose and ban practices of extra judicial targeted killings.”  The resolution also reported that “thousands of civilians have reportedly been killed or seriously injured by drone strikes [but] these figures are difficult to estimate, owing to lack of transparency and obstacles to effective investigation.” Moreover, it was explicitly stated in the report that “drone strike policies have been documented as causing considerable harm to the daily lives of ordinary civilians in the countries concerned, including deep anxiety and psychological trauma, disruption of economic and social activities and reduced access to education among affected communities.”

It is time that we demand that the current administration stop drone attacks on sovereign countries and redirect that money to public education to improve our schools and colleges. We would like to remind President Obama that he is in the Oval Office because he promised to end wars and rebuild America; it is time to follow through on that promise.

[popularecon]

Posted by Jonathan Jenner on March 6th, 2014

By Ricardo Fuentes-Ramírez 

A burning street barricade (Roberto Gil)

The violent opposition protests that erupted during February 2014 in Venezuela are difficult to comprehend relying only on the mainstream media. One of the main sources of this difficulty is the significant number of exaggerated, manipulated, or uncorroborated social media postings. These postings are best exemplified by the number of images from police brutality from other countries that are shared claiming they are from Venezuela in order to discredit the current government.Steve Ellner’s article on Green Left and Pablo Vivanco’s article on BASICS News are recommended in order to give some context on these protests and their aftermath. However, another complicated subject is the economic problems that are mentioned as the causes of these protests, specifically inflation and basic good shortages. Therefore, it is useful to go over some articles that discuss these issues in more depth.

Inflation has always been a problem in Venezuela. As Gregory Wilpert explains, during the 1990s, annual inflation rates averaged around 50%. However, under the Chávez government the trend was finally turned around, with inflation going down to an average 22% per year. Nevertheless, it has continued being a problem. The main cause of inflation is having an oil-based economy. Wilpert explains, “Venezuela receives an influx of petrodollars that basically come into the economy and raise the level of wages and raise the level of prices in a way that heats up inflation.” What the media fails to mention, as Tamara Pearson has emphasized, is that “the government regularly (once or twice a year) increases the minimum wage to match inflation levels, or higher than them, and the informal sector increases its prices to match inflation as well,” so “people’s purchasing power has actually increased significantly under the current government.” In other words, even though there is inflation, Venezuelans’ purchasing power is actually increasing, not decreasing.

The other issue mentioned is shortages of basic goods. Many news sources have tried to give the impression Venezuelans are close to starving. However, as discussed by Ryan Mallet-Outtrim,  “food consumption increased by 80% between 1999 and 2011,” while the United Nations Food and Agriculture Organization “awarded Venezuela for halving hunger within its territory between 1990-1992 and 2010-2012.” Similarly,Oliver Levingston notes “Venezuela’s average caloric intake has gone from 91% of recommended levels in 1998 to 101.6%” so “the average Venezuelan went from being under-fed to exceeding their recommended calorie intake within the space of decade.” Nonetheless, it is true that basic goods like corn flour, milk, and toilet paper are in and out of stock at unpredictable rates. So while Venezuelans aren’t going to be out of flour for more than a few days, you can’t plan to bake a cake next week because maybe there won’t be any (See Pearson’s The Scarcity Diaries).

So what’s behind this occasional scarcity? Is it just bad government policy? Not exactly. In fact, scarcity is mostly fueled by deliberate actions taken by wealthy Venezuelans, which as the government has denounced, are nothing less than an economic war waged against the people. As Levingston explains, private food producers and importers deliberately hoard and engage in investment strikes in order to undermine support for government policy. As evidence of this practice, Levingston mentions some of the numerous cases of government inspectors discovering tons of hoarded food. In early 2008, 13,000 tons of hoarded food were found in two weeks of state inspections. In March 2009, the government nationalized a rice-processing plant after it found 18,000 tons of rice hoarded in warehouses. He adds further evidence lies in the fact that scarcity moves so closely with the electoral calendar, it is difficult to argue it is not, at least in part, by political design. As an example, he mentions one of the periods of greatest shortages were the months prior to the December 2007 referendum. Similarly, “in the lead-up to April 2013 elections, scarcity and disinvestment skyrocketed,” and between the two general elections from November 2012 and June 2013, more than 40,000 tons of hoarded food were uncovered.

In terms of wealthy Venezuelan importers, these usually take advantage of the government’s currency controls in order to acquire US dollars at low rates with the pretense of importing goods for consumption in Venezuela, but instead sell these dollars in the black market. Of what they actually import, as Wilpert explains,between 30% to 40% is smuggled out of Venezuela. Furthermore, what they do offer in stores for consumption in Venezuela is overpriced at black market exchange rates, instead of the exchange rate at which they actually imported it. Tamara Pearson gives the actual example of what she calls one of her few vice foods: Pringles. At the rate at which importers acquire dollars from the government, Pringles should cost close to $2.20. However, they mark up the price according to the rate at which they are selling dollars in the black market, so they actually sell for $15.70! Thus, these wealthy Venezuelans fuel both inflation and shortages in the country.

Why are rich Venezuelans sabotaging their own country? Since the election of Hugo Chavez, and continuing with the presidency of Nicolas Maduro, government policy has been designed to democratize not only the political structures of the country, but the economy as well. The poor Venezuelan masses, for the first time in history, have benefited from the country’s vast resources; they have had substantial access to education and health care, and they have been politically empowered, both through traditional political structures as well as new ones, such as the innovativeCommunes. As the poor working masses have been empowered, the rich have been proportionately disempowered. Thus, wealthy Venezuelans have engaged in political and economic war, through the media and through their resources, to avoid further democratization of Venezuelan society. In a nutshell, that is what’s going on Venezuela.

[popularecon]

Posted by Jonathan Jenner on March 4th, 2014

by David Kotz

Whenever someone proposes a measure to benefit working people, the establishment has the same reply: “That would only hurt the very people you are trying to help.” This applies to proposals to raise the minimum wage, now just $7.25 an hour at the federal level. Of course, the opposition of the rich and powerful to a higher minimum wage could not be because it would redirect part of the profits to hard-working, low-wage workers. No, they insist that raising the minimum wage would only cause low-wage workers to lose their jobs. When rich folks tell such tales, there is reason to be skeptical.

Other posts on this blog have shown that the best studies find no significant job loss, or even a job gain, from raising the minimum wage. Yet the claim of job loss might seem to be a convincing one. After all, if the price of apples goes up, some apples might go unsold. But the market for labor is not the same as the market for apples.

If the minimum wage is increased, more workers will get pay increases than just those making the minimum wage. Economists agree that the wage for jobs that pay not much above the minimum wage also will rise. Since low-wage workers spend just about all of their pay for goods and services, the rising pay for low-wage workers increases total demand in the economy. The result is that businesses will have an incentive to to hire more workers to meet the rising demand.

Some have been calling for a minimum wage increase to $10.10 per hour.  In February 1968 the federal minimum wage was raised to its highest level ever in buying power, from $1.40 to $1.60 an hour. In today’s prices, that was a raise from $9.95 to $10.94 an hour. Yet the unemployment rate fell, from 3.7% in 1967 to 3.5% in 1968 (and to 3.4% in 1969). The economy was much less productive in 1968 than it is today, yet businesses were able to pay a minimum wage of $10.94 in that year, far above today’s minimum wage, with virtual full employment.

A higher minimum wage has other benefits besides the possibility of generating more demand and jobs. When business faces rising wages for their employees, it puts pressure on the business to find ways to make their workers more productive. This can be done by reorganizing the work process or introducing new technologies. In the long run, it is rising labor productivity that makes it possible for wages and living standards to go up over time.

The federal minimum wage has not been increased since July 24, 2009. Since then consumer prices have risen by 8.9%. The already low buying power of the minimum wage has fallen still further in recent years.

The low rate of pay for jobs at the current minimum wage means that the businesses are being subsidized by the taxpayers. A minimum wage of $7.25 per hour comes to just $290 per week before taxes for full-time work. Most minimum wage workers can survive only by relying on public programs such as food stamps. Every business should pay wages that cover employees’ necessary living expenses without dependence on government income supplements. Paying less forces the taxpayers to subsidize the profits of wealthy business owners!

[popularecon]

Posted by Jonathan Jenner on February 27th, 2014

by Anders Fremstad

Comcast, America’s largest cable provider, is acting in a way that should worry consumers and citizens.  First Comcast announced its plans to merge with Time Warner, America’s second largest cable provider. Paul Krugman opposes the merger, but its not like the cable providers currently compete.  As Comcast’s CEOnotes, Comcast and Time Warner “do not operate in any of the same ZIP codes.”  That’s old news to just about anyone who has “shopped around” for cable and internet services and found that they have little choice.  Now, Comcast has announced a deal with Netflix to provide the site with a faster connection, for an unknown price.  Comcast’s recent actions highlight the problem of monopoly in the media industry.  It also provides an opportunity for discussing a solution.  There is a good economic case for forming a public utility, regulated or run by government, that would provide Americans with a better and cheaper internet access and free streaming of television and film.

Netflix has transformed how we watch television and movies, liberating subscribers from advertisements and the channel guide.  The website for streaming videos has helped usher in a golden age in TV dramas, building up fan bases for shows like Breaking Bad, and producing its own like House of Cards. Netflix recently produced The Square, a documentary about the Egyptian revolution, which has given independent filmmakers some hope that the Netflix might provide both an audience and funding for their films.

But there are real limits to how much Netflix can and will change the media industry on its own.  Comcast and the other local cable monopolies own the connection between Netflix and its subscribers.  A court recently struck down the FCC’s net neutrality rules, allowing the cable companies to slow down internet speeds for sites that don’t pay up.  And even if citizens win back net neutrality, cable companies can charge so much for internet-only access that consumers save little by ditching cable television.  

Moreover, although Netflix is innovative, it is motivated by the same monopoly profits as Comcast and Time Warner.  The company has amassed huge wealth for its investors.  Netflix stock is now valued at over $430 a share last Friday, up from less than $100 in Jan 2013.  Netflix only buys streaming rights for shows and movies that cost less than they will generate for the company, so most films aren’t available online.  (A recent headline from The Onion jokes: “Netflix Instant Thinking About Adding Good Movie”.)  And, of course, Netflix is only available to those families that can afford a subscription, on top of the price of broadband internet.

So what is to be done about our media monopolies?  Economics provides a good idea of how to provide people with internet service and quality content at a good price, despite what some people might think.

The first element of an efficient utility policy would be for the government to regulate or run internet providers like Comcast and Time Warner.  We shouldn’t let these companies charge rates far above the actual cost of the service.  How do we know these monopolies are gouging consumers?  First, they generally lure consumers with teaser rates and then jack up the prices once you’re hooked.  Second, in the handful of cities where internet providers actually compete, Google Fiber offers regular broadband internet for free (after an one-time installation fee).  It’s not rocket science.  Local cable monopolies don’t provide Americans with a good service, because they have almost no competitors.  However, if we regulate these monopolies or set up our own public internet utility, there is absolutely no reason that we cannot provide our homes with reliable, affordable internet in the same way they provide our homes with reliable, affordable electricity, gas, or water.

The second element of a rational utility policy is using public dollars to fund content providers.  Traditional, ad-funded television is technologically obsolete, and we should now build on the Netflix model and create a public streaming service.  It should provide all Americans free access to all shows and movies, since the marginal cost of watching any video, once it has been produced, is zero.  Everyone would be able to watch whatever they like, whenever they like, without wasting our time watching commercials.  The public utility could compensate content providers based on how many people view the content, maintaining (and probably intensifying) competition among them.  

But how much would this all cost?  The answer is, not that much, especially when we compare  it to how much Americans currently pay for restricted, ad-ridden content.  For example, Hollywood earns about $30 billion annually from American consumers.  Right now, Hollywood earns its revenue through intricate price discrimination: first it shows movies in the cinema, then it releases them on DVD, and finally it sells them to TV channels, which usually break them up with plenty of commercials.  Hollywood charges big fans much more watch films on Blu-Ray or in 3D.  A public streaming service would liberate Hollywood and movie lovers from this madness.  Let studios and independent filmmakers upload their movies, and the public service could compensate the producers based how many people watch the film (and, perhaps, how they rate it).  We can keep paying moviemakers $30 billion a year.  But for that price — which comes to $8 per person per month — every American would be able to indulge in Hollywood’s contribution to mass culture on their own terms.

Of course, enacting a rational utility policy will be politically difficult.  There would certainly be losers, from the current cable providers to merchants of pirated media.  But there would be many, many more winners.  So let not just fight Comcast’s plan to gobble up Time Warner and extort Netflix.  Lets start a conversation around designing an efficient utility policy for the 21st century.